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As credit tightens at home, Chinese sell Hong Kong luxury real estate

Cash-strapped Chinese are scrambling to sell their luxury homes in Hong Kong, and some are knocking up to a fifth off the price for a quick sale, as a liquidity crunch looms on the mainland.

Wealthy Chinese were blamed for pushing up property prices in the former British territory, where they accounted for 43% of new luxury home sales in the third quarter of 2012, before a tax hike on foreign buyers was announced.

The rush to sell coincides with a forecast 10% drop in property prices this year as the tax increase and rising borrowing costs cool demand. At the same time, credit conditions in China have tightened. Earlier this week, the looming bankruptcy of a Chinese property developer owing 3.5 billion yuan (RM1.85 billion) heightened concerns that financial risk was spreading.

“Some of the mainland sellers have liquidity issues – say, their companies in China have some difficulties – so they sold the houses to get cash,” said Norton Ng, account manager at a Centaline Property real estate office close to the China border, where luxury houses costing up to HK$30 million (RM12.66 million) have been popular with mainland buyers.

Property agents said mainland Chinese own close to a third of the existing homes that are now for sale in Hong Kong – up 20% from a year ago. Many are offering discounts of 5–10% below the market average – and in some cases as much as 20% – to make a quick sale, property agents and analysts said.

In a Hong Kong housing development called Valais, about 10 minutes drive from the Chinese border, real estate agents said that between a quarter and a half of the 330 houses are now on sale. At the development’s frenzied debut in 2010, a third of the HK$30-HK$66 million units were sold on the first day, with nearly half going to mainland China buyers.

Dubbed a “ghost town” by local media, the development built by the city’s largest developer, Sun Hung Kai Properties Ltd, is one of many estates in Hong Kong where agents are seeing an increasing number of Chinese eager to sell.

“Many mainland buyers bought lots of properties in Hong Kong when the market was red-hot three years ago,” said Joseph Tsang, managing director at Jones Lang LaSalle. “But now they want to cash in as liquidity is quite tight in the mainland.”

A spokesman for Sun Hung Kai said the current occupancy rate at Valais was 75%, and most of the second-hand units for sale were “looking for a good selling price and not eager to sell at deep discounts”.

In a nearby development called The Green – developed by China Overseas Land & Investment – about one-fifth of the houses delivered at the start of this year are up for sale. More than half of the units, bought for between HK$18 million and HK$60 million, were snapped up by mainland Chinese in 2012.

China Overseas Land was not immediately available to comment.

“Some banks were chasing them (Chinese landlords) for money, so they need to move some cash back to the mainland,” said Ricky Poon, executive director of residential sales at Colliers International. “They’re under greater pressure from banks, so they’re cutting prices.”

In West Kowloon district, an area where mainland Chinese bought up close to a quarter of the apartments in many newly-developed estates, some Chinese landlords are offering discounts on the higher-end, three- to four-bedroom apartments they bought just a few years ago.

This month, a Chinese landlord sold a 1,300 square foot (121 square metre) apartment at the Imperial Cullinan – a high-end estate developed by Sun Hung Kai in 2012 – for HK$19.3 million, 17% less than the original price. The landlord told agents to sell the flat “as soon as possible”, said Richard Chan, branch manager at Centaline Property in West Kowloon.

In the same area, a 645 square foot, 2-bedroom flat in the Central Park development was sold in just two days after the Chinese owner put it on the market at HK$6.5 million in what agents called the year’s best bargain – the cheapest price for a unit of its kind over the past year.

“The most important thing for them is to sell as soon as possible,” Centaline’s Chan said. “In the past two weeks, those who were willing to cut prices were mainland Chinese. It is going to have some impact on the local property market, that’s for sure.” – Reuters, March 20, 2014.